Practicing Success

Target Exam

CUET

Subject

Business Studies

Chapter

Financial Management

Question:

Answer the questions on the basis of the information given below.

Company X
TOTAL FUND USED = 30 LAKHS

Face value of share
₹10/-
Interest rate on Debt 10%
Tax rate 30%
EBIT 4 Lakhs
Situation I (Debt) Nil
Situation II (Debt) 10 Lakhs

 Choose the correct answer from the options given below:

The Earning After Tax (EAT) for situation II is:

Options:

₹90,000

₹3,00,000

₹2,10,000

₹2,00,000

Correct Answer:

₹2,10,000

Explanation:

         EBIT = 4,00,000 
less: Interest = 100000
         EBT = 3,00,000 (Earnings before taxes)
less: Tax = 90,000 
         EAT 2,10,000